Top Bitcoin proponent to plead guilty to federal charge

Charles Shrem, 24, left, speaks with another Bitcoin dealer, at a bar in New York. He will plead guilty to aiding unlicensed money transmitting.

Photo: BRYAN R. SMITH, STR

A prominent supporter of Bitcoin, Charles Shrem, says he will plead guilty Thursday to resolve federal charges that he helped smooth the way for drug transactions on the online marketplace Silk Road.

He is to plead in New York federal court to one count of aiding and abetting the operation of an unlicensed money transmitting business.

The revelation came as the death of one of the inventors of Bitcoin was announced.

Shrem, one of the most vocal advocates of Bitcoin, was accused in January of using his company to convert dollars into Bitcoin for users of Silk Road, the now-defunct bazaar known for its wide selection of narcotics and drug paraphernalia.

Federal prosecutors contended that he operated the scheme in cooperation with Robert Faiella, known as BTCKing, who was also arrested in January, in Florida.

"They want a guilty plea on their books, and that's what they're going to get," Shrem said Saturday from his parents' home in Brooklyn.

"They got a Bitcoiner."

Shrem's arrest at John F. Kennedy International Airport this year stirred consternation in the Bitcoin world, which continues to grapple with the perception that the digital currency provides an anonymous way to engage in illegal activity.

Shrem, 24, said his plea could include jail time, though he is optimistic that it will not.

Meanwhile, Hal Finney, a cryptographer and one of the earliest users and developers of the virtual currency, died on Thursday in Phoenix. He was 58.

Finney had been paralyzed by amyotrophic lateral sclerosis, or ALS, and was taken off life support at Paradise Valley Hospital, his wife, Fran Finney, said.

She said his body was immediately prepared for cryonic preservation by the Alcor Life Extension Foundation in Scottsdale, Ariz., according to his wishes.

In 1991, he began doing volunteer work for a new software project known as Pretty Good Privacy, or PGP, and immediately became one of the central players in developing the program.

PGP aimed to make it possible for people everywhere to encrypt electronic communication in a way that could not be read by anyone other than the intended recipient.

The program used relatively new innovations in encryption that are still thought to be invulnerable to code breakers.

While working on PGP, Finney became fascinated by the concept of digital currencies that could not be tracked by governments and banks.

He was involved in many experiments aimed at creating an anonymous form of digital money, including his own invention, in 2004, of reusable proofs of work.

Though that system never took off, he quickly saw the promise of the Bitcoin project when it was announced on an obscure email list in 2008 by a creator with the pseudonym Satoshi Nakamoto, who some thought was Finney, speculation that he denied.